Odds of a recession are increasing and the global growth environment is concerning, Washington Crossing Advisors' Chad Morganlander told Real Vision's Trade Ideas.
He said that Washington Crossing Advisors' expectations for the S&P 500 over the next 7 to 10 years is roughly about a 5% to 6% long-term return, coupled with more volatility.
This outlook is why Morganlander is telling clients to "move up the quality spectrum," which means buying companies that have "lower volatility, much more predictability within their gross margins, companies that have a well-diversified product line and client base, and also absolutely pristine balance sheets."
"The expectation and the hope is that if you do have a gap in financial stress, these type of companies, even within a recession, you won't get it where they earn a billion dollars and then lose $3 billion," he said.
Morganlander said that Hormel Foods is the perfect example of this type of safer investment. He said that the stock price of HRL might bounce around, but that Washington Crossing Advisors believes that over the long run, the company could do well.
As well as the "Steady Eddie" returns that HRL is already delivering, Morganlander pointed out that their move into plant-based proteins and other types of new products will gradually increase the operating margins of the company.
Morganlander sees HRL's stock price increasing to at least $46 in the next 18 months.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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